R.I. Governor Chafee not keen on sales-tax repeal

Friday

Dec 20, 2013 at 6:00 AM

PROVIDENCE, R.I. -- Governor Chafee is not keen on repealing or dramatically reducing Rhode Island's 7 percent sales tax unless the lawmakers promoting the idea lay out a very specific plan for making that revenue up.

Katherine Gregg Journal Political Writer kathyprojo

PROVIDENCE, R.I. -- Governor Chafee is not keen on repealing or dramatically reducing Rhode Island's 7 percent sales tax unless the lawmakers promoting the idea lay out a very specific plan for making that revenue up.

"Every politician likes to cut taxes. I mean that is a no-brainer for a politician,'' Chafee said Thursday of the proposals that a special legislative commission has been studying for months.

The sales tax will raise an anticipated $904 million this year. Advocates of repeal contend the elimination of the tax would be a game-changing move that would kick start Rhode Island's economy. The study commission may wrap up its work as early as next week.

Chafee's response: "If they are proposing lowering the sales tax ... and there is a [revenue] loss, tell me where you make it up ... . Which programs are you going to cut. Higher education like you did in the previous administration? Aid to cities and towns like you did in the previous administration?''

"I haven't seen any of those proposals,'' Chafee said during a wide-ranging interview in his office about his legislative priorities during his last year in office.

In his final budget proposal, Chafee said he hopes to spur a different kind of tax-and-spending debate. The focus: what to do with the "$70 million or $80 million'' windfall Rhode Island could receive if Congress requires online retailers and other remote sellers to collect state sales taxes.

A version of the so-called Marketplace Fairness Act cleared the U.S. Senate last May, but has not been put to a House vote. On the day it passed the Senate, U.S. Sen. Sheldon Whitehouse issued a news release explaining the argument:

"Currently, businesses that sell goods in brick-and-mortar stores are required to collect state sales taxes at the point of sale. However, if consumers purchase the same products from web-based retailers, the consumers are responsible for paying the sales tax when they file their yearly state tax return. As a result, a large majority of these sales taxes go uncollected, costing states billions of dollars in lost revenue. Rhode Island alone lost over $70 million in 2012 through uncollected taxes from internet sales.''

The Rhode Island General Assembly included language in a past budget to reduce the state's 7 percent sales tax rate if -- and when -- Congress passes this long-debated measure.

Chafee said he may use the budget he proposes in January to open the door to other possible uses of this huge windfall, should it come Rhode Island's way. As examples, he cited reductions in the state's corporate and estate taxes to help make the state "more competitive'' and "keep our higher earners here,'' along with "investments in our infrastructure and [any] other good idea.

"But be ready,'' he said.

His first year in office, Chafee proposed lowering the sales tax rate, and extending it to many more items and services.

While he still defends the idea, Chafee gave no indication he will propose it again given all the opposition it generated.

Last year, he proposed a reduction in the state's corporate tax rate from 9 percent to 7 percent, over several years, but again lawmakers were unwilling to go along with his proposal for making up that lost revenue: the repeal of a jobs-tax credit that primarily benefits CVS.

As he put it, "the legislature didn't have the appetite to phase CVS off that program.''